NRMLA Touts New Reverse Mortgage Feature

The National Reverse Mortgage Lenders Association has announced the implementation of the "principal limit lock," which it describes as a consumer protection that freezes the "expected interest rate" on federally insured reverse mortgages for up to 60 days from the date of application.The expected interest rate is used to calculate the amount of funds available from a Home Equity Conversion Mortgage, and is a "critical factor" in determining how much equity an elderly homeowner is eligible to receive from a HECM, according to NRMLA. The association said it has developed a model disclosure that explains how the principal limit lock works. Before the advent of this feature, borrowers received less money if rates increased between the time of application and the time of loan closing, NRMLA said. "Interest rate fluctuations over the past several years have benefited some reverse mortgage borrowers, but hurt others," said NRMLA president Peter Bell. "This principal limit lock protects borrowers in a rising rate environment, yet lets them benefit if rate are lower at the time of closing." The association can be found online at http://www.reversemortgage.org.